QUESTION 1

1.When a bank is expecting to be able to employ the same managers, employees and

physical resources to offer multiple products and generate costs savings they are expecting which of the following effects?

A) Product Line Diversification Effect

B) Economies of Scope Effect

C) Economies of Scale Effect

D) Geographic Diversification Effect

5 points

QUESTION 2

1.Business (commercial) transaction accounts are generally more profitable than personal checking accounts. Which of the following explain the reasons for this statement:

A) The average size of the business transaction is smaller than the personal

transaction

B) There are no interest expenses are associated with commercial deposit transaction

C) The bank receives more investable funds in the commercial deposits transaction

D) The average size of the business transaction is the same as a personal transaction

5 points

QUESTION 3

1.Wells Fargo wants to issue new shares of stock to the public. Which of the following regulatory agencies would have to approve this offering of stock?

A) The Comptroller of the Currency

B) The Securities and Exchange Commission

C) The Federal Reserve

D) The State Banking Commission

5 points

QUESTION 4

1.Banks depend heavily upon borrowed funds supplied by customers with little owners'

capital invested. This means that banks make heavy use of:

A) Financial leverage

B) Capital restructuring

C) Operating Leverage

D) Margin borrowing

5 points

QUESTION 5

1.A bank determines from an analysis on its deposits that account processing and other operating expenses cost the bank $4.45 per month. The bank has also determined that non-operating expenses on deposits are $1.15 per month. It has also decided that it wants a profit of $.45 on its deposits. What monthly fee should this bank charge on its deposit accounts?

A) $6.05

B) $5.60

C) $5.15

D) $4.45

5 points

QUESTION 6

1.Which of the following is not a guideline for liquidity managers of banks?

A) The liquidity manager must only keep track of the activities of some and not all departments of the bank

B) The liquidity manager must know in advance (if possible) the plans of major creditors and depositors

C) The liquidity manager should make sure the bank has clear priorities and objectives for liquidity management

D) The liquidity manager must analyze the liquidity needs of the bank on a

continuous basis

5 points

QUESTION 7

1.Some services of this type of bank are highly centralized while others are decentralized at the individual service facility. What type of bank does this most likely describe?

A) Unit bank

B) Branch bank

C) Bank holding company

D) Virtual bank

5 points

QUESTION 8

1.The most important goal of any merger should be to:

A) Increase the market value of the surviving firm

B) Reduce the risk of the surviving firm through geographic diversification

C) Increase managerial compensation

D) Increase the efficiency of the target firm

5 points

QUESTION 9

1.A lender that makes a loan to a minor would be violating which of the 6 C's of lending?

A) Character

B) Capacity

C) Control

D) Collateral

5 points

QUESTION 10

1.First federal decides to make a home mortgage to one of its clients. Which account on the balance sheet would this mortgage be included in?

A) Cash and Due from Depository Institutions

B) Investment Securities

C) Trading Account Assets

D) Gross Loans

5 points

QUESTION 11

1.What is the definition of a bank as defined by the United States Congress in the 1980s?

A) It is any institution that offers credit card services

B) It is any institution that makes loans of a commercial nature

C) It is any institution that accepts deposits subject to withdrawal upon demand

D) It is any institution that qualifies for FDIC deposit insurance

5 points

QUESTION 12

1.The most popular domestic source of borrowed reserves for U.S. banks is:

A) Money market negotiable CDs

B) Federal funds market

C) Eurodollar market

D) Borrowings from the Federal Reserve Banks

5 points

QUESTION 13

1.There are several reasons that banks are regulated. If you are worried that you might not get a loan from the National Bank of South Carolina because of the way you look, which reason for regulating banks might this be an example of?

A) To protect the safety of the public's savings

B) To control the supply of money and credit

C) To ensure equal opportunity and fairness in the public's access to credit

D) To avoid concentration of power in the hands of a few individuals and institutions

5 points

QUESTION 14

1.When John Doe opened an account that allows him to write checks to pay for his groceries and other purchases, the bank is providing the service of:

A) Currency exchange

B) Discounting commercial notes

C) Safekeeping of valuables

D) Offering demand deposits

5 points

QUESTION 15

1.Which of the following would be the most important consideration for locating a new

branch bank?

A) Large populations of above average age

B) Few shops and a rural farm setting

C) A rapidly increasing number of facilities operated by competitors

D) Below average population density

5 points

QUESTION 16

1.The uncertainty in earnings due to misconduct by employees, computer errors, flooding, lightning strikes and other similar events is referred to as:

A) Capital risk

B) Liquidity risk

C) Operational risk

D) Interest rate risk

5 points

QUESTION 17

1.The following are reasons that bank mergers do not work, except?

A) Ill-prepared management

B) A good match of corporate cultures

C) Excessive prices paid by the acquirer for the acquired bank

D) A failure to take into account customers' feelings and concerns

5 points

QUESTION 18

1.The First State Bank of Summerville knows that, if they issue commercial paper through a

subsidiary, money is very tight and the interest rate on the commercial paper may very high. What factor that affects a bank's use of non-deposit sources of funds is the bank concerned about?

A) The relative cost of raising the funds

B) The length of time the funds will be required

C) The risk associated with each source of funds

D) The size of the bank

5 points

QUESTION 19

1.ROE for a bank is calculated by:

A) Dividing net after-tax income by total equity capital.

B) Dividing total operating revenue less operating expenses by total assets.

C) Deducting total interest expenses from total interest income and dividing by total equity capital.

D) Noninterest income less noninterest expenses divided by total earning assets.

5 points

QUESTION 20

1.Credit is extended to a company up to one year to purchase raw materials and cover a seasonal peak need for cash. What type of loan is this?

A) Self-liquidating inventory loan

B) Revolving line of credit

C) Security dealer financing

D) Working capital loan